Question

Companies in the U.S. car rental market vary greatly in terms of the size of the fleet, the number of locations, and annual revenue. In 2011, Hertz had 320,000 cars in service and annual revenue of approximately $4.2 billion. Suppose the following data show the number of cars in service (1,000s) and the annual revenue ($ millions) for six smaller car rental companies.

Company	Cars (1,000s)	Revenue ($ millions)
Company A	11.5	120
Company B	10.0	133
Company C	9.0	100
Company D	5.5	39
Company E	4.2	38
Company F	3.3	32

(a)Develop a scatter diagram with the number of cars in service as the independent variable.

(b)What does the scatter diagram developed in part (a) indicate about the relationship between the two variables? (Pick one of the options below)

There appears to be a negative linear relationship between cars in service (1,000s) and annual revenue ($ millions).

There appears to be no noticeable relationship between cars in service (1,000s) and annual revenue ($ millions).    

There appears to be a positive linear relationship between cars in service (1,000s) and annual revenue ($ millions).

(c) Use the least squares method to develop the estimated regression equation that can be used to predict annual revenue (in $ millions) given the number of cars in service (in 1,000s). (Round your numerical values to three decimal places.)

ŷ = ____

(d)For every additional car placed in service, estimate how much annual revenue will change (in dollars). (Round your answer to the nearest integer.)

Annual revenue will increase by $ ___, for every additional car placed in service.

(e)A particular rental company has 6,000 cars in service. Use the estimated regression equation developed in part (c) to predict annual revenue (in $ millions) for this company. (Round your answer to the nearest integer.)

$___ million

Answer 1